If you are considering entering into a contract with a child, you need to consider important legal issues before going ahead, because you may not be able to enforce the contract if things go wrong.
What is a minor?
A minor is someone under the age of 18 years (Births and Deaths Registration Amendment Act (No 1) 2002) – 18 is the age at which a person reaches their majority.
Contracting with a minor
When might I need to contract with a minor?
Sometimes, a minor needs to enter into a contract with someone, for instance, a 10-year-old may go to the fish and chip shop to buy dinner, or pay to go to the swimming pool or cinema.
In other cases, a minor may be expected to sign a contract, for example, when buying something they may be required to sign terms and conditions of sale; or in the sporting context, an employment contract may be entered into by a minor under which they would play for a professional football team.
The law does not forbid contracting with minors per se. However, there are restrictions as to the enforceability of contracts with minors; and there are some contracts with minors which are void and have no legal effect.
What’s the normal position when entering into a contract?
The general rule is that for a legally binding contract to exist, there must have been an offer, an acceptance of that offer, consideration (a price paid), and an intention to form a legally binding contract.
If all these elements are in place a contract will normally be legally binding. However, the law presumes that certain people do not have legal capacity to enter into a contract. The law says that a contract is void, notwithstanding the fact that the contract would otherwise be valid, if:
- One of the parties is under 7 years of age;
- One of the parties is diagnosed as having a serious mental health issue;
- One of the parties’ judgement has been impaired by being intoxicated or drug addicted.
A child who is 7 or over does have capacity in law to enter into a contract. However, there is the legal assumption that a minor cannot fully understand the implications of a contract.
The presumption that a contracting minor does not fully understand the implications of entering into the court is protected by the law, by being able to avoid the contract at any time – even if this is to the disadvantage of the other party. In addition, the other party cannot cancel the contract.
A contract entered into with a minor is therefore voidable. This means that the minor can cancel, or avoid any contract at any time before reaching the age of 18 years, and for a reasonable time afterwards. A minor does not have to give any reason for cancelling the contract.
Are there any exceptions?
Yes, there are some important exceptions to the above position. The rule that contracts with minors are voidable by the minor does not apply to contracts of service, apprenticeship and education with children.
This is because the types of organisations that enter into these kinds of contracts with children require some form of certainty that enables the child to earn a living or to start to do so. The law views these contracts as beneficial to the minor: it would be an untenable position if the contract could then be unilaterally cancelled by the minor.
In addition, a minor will be able to contract to buy necessities and will be expected to pay a reasonable price for them. If a minor enjoys goods or services (for example, buys and eats dinner at a cafe), they cannot cancel the contract and be reimbursed.
However, this exception will always be subject to the minor being at least old enough to understand the nature of the contract they are entering into. If the minor is not deemed old enough to understand the nature of the contract, then the contract will fall outside of this exception and will be void.
Can the court enforce a contract with a minor?
If the child was deemed old enough to understand the nature of the contract, and the contract was deemed beneficial because, eg. it is a contract of service, apprenticeship or education, the court would not order the contract to be performed. For public policy reasons, the court will not force people to continue in a personal relationship against their will. Instead, the appropriate remedy may be damages for breach of contract.
Is there a way around this position?
When entering into a contract with a minor, the other party could consider ensuring that there is a guarantor provision within the contract.
What is meant by a guarantor?
A guarantor is another party to the contract, in most cases the child’s parent(s). In the case of default on the part of the minor, the guarantor becomes responsible for the minor’s contractual obligations, for instance, taking over the payment of rent or other monthly payments.